Oyster Point Board Fine Tunes Policy

Prospectus

The Oyster Point board of directors just got out of the business of owning buildings.

It's a move that should help the park's landowners sleep a little bit easier.

Actually, the board has never owned any buildings in the business park. Although it still owns about 20 acres of undeveloped property, the corporation's directors have never wanted to own any of the 170 office buildings, warehouses, manufacturing or commercial buildings in Oyster Point.

But until recently, the board, which oversees development in Oyster Point of Newport News, had the power to buy any property placed for sale in the park - including developed property.

"If I were a landowner in Oyster Point, it would irritate the heck out of me," said Donald Ragland Jr., chairman of the seven-member board.

"It doesn't seem like the American way to have the right of first refusal on developed property. It's the principle of the thing."

The right of first refusal, as the power to buy back property placed for sale is called, rests in deed restrictions that date back to the park's inception in 1978.

According to the restrictions, any property owner in Oyster Point who received a bona fide offer to sell his land was required to first take the proposal to the Oyster Point Development Corp.'s board of directors.

The board then had the power to either buy the property under exactly the same terms, or to waive its right and allow the sale to take place.

The board also required owners to start construction within 18 months after the property was purchased. When a sale occured, the 18-month clock started over.

If time ran out before construction had started, the board could either buy back the property at 80 percent of its assessed value - 80 percent of fair market value in the oldest section of the park - or grant a construction extension.

"Back when Oyster Point was started, the board decided that it needed control over how the park developed," Ragland said.

"They felt they really needed the power to reacquire property if they saw fit to do so," he said.

At first, the board really had no opportunities to use the power. In its first seven years, the board sold land to only three businesses in the park.

But once the land began to sell, the buyback issue caused problems within Oyster Point.

Until October 1987, the board routinely granted extensions and waived its right of first refusal. As a result, some owners began to make money speculating on land in the park.

In some cases, the board granted construction extensions to property owners who didn't build, then waived the right to repurchase the land. Original buyers ended up selling undeveloped land for more than double their original purchase price.

The speculating was all legal, but the board was forgetting that its mission was to stimulate development and job growth, not to drive up land prices in the park.

In October 1987 the board decided to halt the speculation. It extended the 18-month contruction deadline to 2 1/2 years, and made the deadline more concrete.

The board also began to exercise its buyback powers on undeveloped land. Because of the policy change, the development corporation today owns more land than it did two years ago.

The changes appear to have succeeded in curbing speculation at Oyster Point. They've also angered some property owners who feel they should be permitted to buy and sell property whenever and to whomever they wish.

Their complaints aren't really valid, because Oyster Point landowners knew of the deed restrictions when they bought into the park. That's the price you pay when you buy land from a public agency.

But some landowners have been justifiably uneasy with the Oyster Point board having the power to scuttle their potential sales by exercising the right of first refusal on developed land.

"Every time someone in the park wanted to sell their property they had to submit the contract to the Oyster Point board," said Walter Apelt, executive director of the corporation.

"Although it's only been a formality, it has slowed the process down. For the owners, it could chill a potential sale."

For example, knowing that the board could refuse to allow a negotiated sale, the deed restrictions may scare a potential buyer away from trying to purchase privately owned property in the park.

In addition, some property owners prefer to keep the terms of their sales agreements in private, rather than disclosing them to the seven-member board.

"Most companies jealously guard their privacy," Apelt said.

"The board looked at this and said, `Why are we doing this? We don't want to own any buildings. We're here to create new jobs and expand the tax base.'"

In December, the board agreed to change its policy, dropping the right to buy back developed property.

This month the new restrictions were recorded at the Newport News courthouse, and property owners will be officially notified of the change within a few weeks.

Since the board retains jurisdiction over the aesthetics and land uses in the park, it really isn't losing any of the control that it needs to make Oyster Point a nicer place.

Now that they've cut back on the speculation in the park, it's a good sign that the Oyster Point board can fine-tune its buyback policy.